April 2020 investment update

27 April 2020

COVID-19 pandemic and our investment portfolio

  
The COVID-19 pandemic has had a significant impact on global share markets over the last two months. This has been mainly due to government restrictions which have sharply reduced economic activity here in Australia and around the world.

However, LGS has a highly diversified investment portfolio that includes Australian and international shares, property, infrastructure, private equity, fixed interest and absolute return asset classes. This diversification has helped to reduce the volatility across the fund’s portfolio.

In the period leading up to the pandemic, LGS had a relatively low weighting of Australian shares in our portfolio and this has helped to reduce the volatility for our investment options with a greater exposure to growth assets such as our High Growth and Balanced Growth options.

Our international share portfolio is only partly hedged against the Australian dollar. This means that the recent fall in the value of the dollar has helped to reduce the losses across international shares.

LGS has revalued our alternative assets to reflect the current environment but these assets which include private equity, debt and infrastructure have still performed better than Australian and international shares over the last two months.

LGS is committed to a genuine responsible investment strategy and our aim is to earn long-term sustainable returns for all our members.

Visit our performance pages for details of our latest performance results.

LGS International Shares

Overall portfolio performance as at 31 March 2020 

1 Month3 Months1 Year3 Years5 Years7 Years
-12.1% -16.9% -5.7% 4.9% 5.4% 10.8%

Source: JP Morgan Custody Report

WindfarmAs long term asset owners we participate in the transition to a more sustainable economy. LGS invests in a company called EDP Renovaveis (EDP), a Spanish renewable energy company operating in 14 countries around the world.

Renewable energy sources such as onshore & offshore wind as well as solar do not produce toxic emissions, particulate matter or greenhouse gases.

As an owner and operator of assets, EDP is committed to maintaining long term operations for the benefit of shareholders and stakeholders whilst keeping environmental impact to a minimum.

One of EDP’s projects in Rio Grande Do Norte (Brazil) will supply energy to 800,000 homes and between January and December 2019, the company supplied 30 terrawatt hours of clean electricity avoiding 19 metric tonnes of CO2 emissions.

SDG13The investment predominantly meets:

United Nations Sustainable Development Goal 13
Climate Action

 

LGS direct property portfolio

Overall Portfolio Performance as at 31 March 2020

Local Government Property Fund (LGPF) vs Benchmark

LGPF delivered a return of 10.3 % over the year, outperforming the benchmark by 6.78%.

 1 Month3 Months1 Year2 Years3 Years5 Years
 LGPF  -0.38%  0.32%  10.30%  11.23%  14.73%  17.35%
 Benchmark*  -1.92%  -1.22% 3.52%  6.29%  8.38%  10.21%
 Excess return  1.54%  1.54%  6.78%  4.94%  6.35%  7.14%

Source: J.P. Morgan Custody Report / * Mercer/IPD Australian Property Pooled Fund Index

Climate Bond Certified Green Loan for Direct Property Portfolio

Local Government Property Fund (LGPF) recently partnered with Westpac to roll over its existing $65 million debt facility into a Green Loan as certified by the internationally recognised Climate Bonds Initiative (CBI).

The loan is 'Green' because the proceeds are applied to refinance eligible 'Green Assets' which meet stringent emissions criteria set by the CBI. This requires LGS assets to perform in the top 15% of buildings in the market in terms of their emissions intensity.

The Green Loan extends LGS's 'sustainability reach' into the area of responsible finance and this meets our mission objective to create a sustainable future for our members. Members also benefit from the low interest rate compared to the broader market.

LGPF is one of the most sustainable property portfolios in Australia. In 2017, our property portfolio was the first in Australia to receive a 5-Star Green Star Performance rating from the Green Building Council of Australia. Last year we were the first property portfolio to achieve carbon neutral certification for all of our NABERS rated buildings under the Australian Government’s Climate Active program.

SDG13The investment predominantly meets:

United Nations Sustainable Development Goal 13
Climate Action

 

LGS Alternatives

Overall Portfolio Performance as at 31 March 2020

 1 Year2 Years3 Years5 Years
Private Equity 11.10% 9.92% 12.88% 12.63%
Opportunistic Alternatives -1.61% 1.07% 3.78% 4.57%
Defensive Alternatives 10.99% 9.15% 8.78% 12.38%

Source: JP Morgan Custody Report

LGS invests in 'Alternatives' which include private equity, debt and infrastructure. These investments earn long term stable returns which are more insulated from market volatility.

Private Equity

Through the Stafford Capital Clean Tech fund and Neptune Aquaculture, we invest in global aquaculture. They identify mega trends which are transforming the way food is produced and consumed. These trends can provide significant opportunities for investors.

Mega Trends

Mega Trends

This fund manager focuses on the following services to add value to companies:

  • Advanced computing
  • Underwater cameras
  • Vessel technology
  • Pharmaceuticals
  • Food and feed science
  • Supply chain logistics

As the world becomes more affluent and international seafood trade grows, an integrated supply chain between local and international markets is evolving.

Stricter animal welfare, environmental standards, workplace health and safety, food safety and product traceability regulations increase the demand for sophisticated service providers.

fish

The investment predominantly meets:

SDG02

United Nations Sustainable Development Goal 2
Zero Hunger

SDG03United Nations Sustainable Development Goal 3
Good Health and Well Being

SDG11United Nations Sustainable Development Goal 9
Industry, Innovation and Infrastructure

SDG11United Nations Sustainable Development Goal 12
Responsible Consumption and Production

SDG11United Nations Sustainable Development Goal 14
Life Below Water

 

 

Opportunistic Alternatives

housingLGS finances a residential project in London comprising private apartments and town houses as well as affordable housing units, all which have been pre-sold to a housing association.

The residential scheme is a regeneration project to transform a disused land site into a community. This is composed of over 2,200 homes, new parks, a new public piazza and a school as well as improved infrastructure.

SDG11The investment predominantly meets:

United Nations Sustainable Development Goal 13
Sustainable Cities and Communities

 

Defensive Alternatives

Echoenergia

Wind farms

Through their high-tech operations centre in Sao Paulo, Echoenergia remotely monitors the activities and about 40 wind turbines on its farms.

Brazil is Latin America’s largest economy with some of the best wind resources in the world.

Echoenergia is one of our investments; a wind platform operating in the north-east of Brazil. It builds, owns and operates wind assets with a target portfolio of 1 gigawatt. Already it owns two wind farms with contracted power purchase agreements totalling 130 megawatts and 216 megawatts respectively.

Clean power not only combats climate change but also creates jobs. Echoenergia has created 30 permanent jobs and 432 contractor jobs. Additionally, Echoenergia’s community investment programs provide quality education facilities and training to 7,860 community members through US$1.0 million investment to date.

 

SDG07The investment predominantly meets:

United Nations Sustainable Development Goal 7
Affordable and Clean Energy

goals

United Nations Sustainable Development Goals (UNSDG’s) are a set of 17 aspirational goals developed by the United Nations to end poverty, protect the planet and ensure all people enjoy peace and prosperity.  The goals tackle areas including climate change, economic inequality, innovation and sustainable consumption.  LGS’ portfolio investments directly meet these goals and contribute to our impact footprint.

The information on this website is of a general nature only and does not take into account your personal objectives, situation or needs. You should consider obtaining professional financial, taxation and or legal advice tailored to your personal circumstances prior to making any financial decision.